SBM - State Bar of Michigan

RI-27

May 19, 1989

SYLLABUS

Although there may be restrictions imposed by law on the right of one person to purchase a policy of insurance on the life of another, it is not ethically improper for a lawyer to secure payment of legal fees by means of a policy of insurance on the life of a client.

References: MRPC 1.5, 1.8(j)(1).

TEXT

A lawyer has represented a client in a number of legal matters over a period of several years. The client was charged for the legal services at an hourly rate but became financially unable to pay the fees as they were earned. Despite this delinquency in payment, the lawyer continued to provide legal services to the client through conclusion of litigation of the various matters at the trial level. As a result, the client has accumulated a substantial debt to the lawyer for legal services rendered and expenses. The amount due and owing is undisputed.

Because the client has no assets, and has insufficient income to pay the debt at this time, and because the lawyer is contemplating providing the client with additional legal services, the lawyer proposes to secure payment of the legal fees by arranging for the purchase of a policy of insurance on the client's life in an amount sufficient to satisfy the outstanding balance, with the lawyer being named as irrevocable beneficiary. The Committee is requested to comment on the ethical propriety of securing payment of legal fees in this fashion.

The ethics rules do not specifically address this issue. The Comment to MRPC 1.5 concludes that "A lawyer may accept property in payment for services" with certain limitations not relevant here. Further, MRPC 1.8(j)(1) permits a lawyer to acquire a lien granted by law in the cause of action or subject matter of litigation to secure the lawyer's fee and expenses.

A person may name anyone they wish as a beneficiary of an insurance policy on their own life, although there may be limitations, imposed by law, on the right to purchase such a policy on the life of another. This, however, is primarily a legal question beyond the competence of this Committee to answer. Since the proposed conduct does not appear to violate either the letter or spirit of the Rules, securing payment of legal fees by means of an insurance policy on a client's life is not ethically proscribed.